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How the falling INR can help NRIs

Just 6 months ago, on 7th June, 2011, the USD – INR exchange rate was 44.8001 INR to 1 USD. On 7th December, 2011 the rate was 51.8046 INR to 1 USD. This is a depreciation of close to 16%.

Let’s take a look at the Arab Emirates Dirham.
On 7th June, 2011, it was 12.2073 INR to 1 AED. On 7th December, 2011 the rate was 14.116 INR to 1 AED. This is a depreciation of close to 16% - the same as the depreciation against the USD as is to be expected.

NRIs in the land down under aren’t left out either.
On 7th June 2011, the Australian Dollar (AUD) was worth 48.0032 INR. On 7th December, 2011 it was worth 53.246 INR. That’s a depreciation of 10.92%.

The situation is roughly the same with a lot of other currencies.
Is this good news for NRIs? Definitely. Here’s why.

For every USD, AED or AUD or other appreciated currency (for example the Euro, the British Pound, the Kuwaiti dinar have all appreciated against the INR) sent to India, you’re getting more bang for the buck. For example, on 7th June, AUD 1000 remitted to India was the equivalent of Rs. 48,003. Yesterday, it was the equivalent of Rs. 53,246. This is why remittances to India have sharply increased in the last few months. Now, as an NRI, you can take advantage of this fall in the following ways:

To start with, not only has the INR depreciated, but we are in a period of high interest rates, so NRE and NRO deposits now earn more than they did 6 months ago. Your savings help in your NRE and NRO accounts will now earn you higher interest due to this increase in rates. Current NRO account interest rates for 1 year and thereabouts is in the range of 9.00% to 9.25% at banks such as HDFC Bank and Bank of Baroda. NRO deposit rates at Standard Chartered and HSBC are lower, in the range of 7.75% to 8.25% for the same 1 year tenure.

Thanks to the depreciation of the INR, if you have invested in property in India with the help of a home loan, you can prepay more of your loan by sending back just the same amount of EMI each month, as you’ll be paying more rupees for the same amount of dollars. If you want, you can also consider adding to your real estate portfolio by buying another house. Thanks to the rupee depreciation, homes are increasingly cheaper in dollar terms. However, this of course might not be enough incentive to buy a house. You must also consider the nearness of your other life goals and the availability of surplus funds before making use of the depreciated rupee.

Even corporate FDs are currently offering double digit interest rates (with a sweetener for senior citizens) so they make a very good investment avenue for NRIs considering the current depreciated rupee. Corporate FDs such as Shriram Unnati, HDFC Ltd, DHFL and others are offering interest in the range of 9.50% to 10.25% for 1 year deposits. NRIs can invest in these deposits from their NRO account.


In conclusion, while the time is indeed right considering the depreciated rupee, it is important to keep in mind certain points before remitting additional funds to India, as an NRI:

- Consider your investment vehicle carefully. If you are investing in equity because the markets are depressed, try and avoid a lump sum investment. Opt for a Systematic Investment Plan, as we will likely see more volatility in the coming months

- If investing in equity, also consider the time horizon of this investment. When are you going to require these funds? At PersonalFN, we believe that if you’ll need the funds in less than 3 years, equity is not for you, opt for a high rated corporate FD instead

- Are you going to repatriate these funds? Repatriation rules will indicate whether you need to invest from your NRO or NRE account

- Keep your taxes in mind. If you’re investing in a house property using a home loan, utilize the home loan principal repayment deduction under Section 80C and also the interest repayment deduction under Section 24 to reduce your tax liability on income arising / accruing in India.

So keep these points in mind and make the most of the current rupee scenario.